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Does Higher Tax Morale Imply Higher Optimal Labor Income Tax Rate?

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  • Andras Simonovits

    ()
    (Hungarian Academy of Sciences)

Abstract

We analyze the impact of tax morale on optimal progressive labor income taxation. Only universal basic income is financed from a linear tax and the financing of public goods is neglected. Each individual supplies labor and (un)declares earning, depending on his labor disutility and tax morale. Limiting the utilitarianism to the poorer parts of the population (defined by the inclusion share), the optimal tax rate is an increasing function of the tax morale and a decreasing function of the inclusion share, provided that the average wage of those included is higher than 0.54 times the average wage.

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Bibliographic Info

Article provided by European Association Comenius - EACO in its journal DANUBE: Law and Economics Review.

Volume (Year): (2013)
Issue (Month): 2 (June)
Pages: 97-114

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Handle: RePEc:cmn:journl:y:2013:i:2:p:97-114

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Keywords: Tax Morale; Progressive Income Tax; Undeclared Earning; Income Redistribution; Labor Supply;

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  1. Zsombor Z. Méder & András Simonovits & János Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," Working Papers 1202, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
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  7. Andras Simonovits, 2011. "Higher tax morale implies a higher optimal income tax rate," IEHAS Discussion Papers 1137, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  8. Cowell, Frank A. & P.F. Gordon, James, 1988. "Unwillingness to pay : Tax evasion and public good provision," Journal of Public Economics, Elsevier, vol. 36(3), pages 305-321, August.
  9. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
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  15. Lago-Peñas, Ignacio & Lago-Peñas, Santiago, 2010. "The determinants of tax morale in comparative perspective: Evidence from European countries," European Journal of Political Economy, Elsevier, vol. 26(4), pages 441-453, December.
  16. Barnabas M. Garay & Andras Simonovits & Janos Toth, 2011. "Local Interaction in Tax Evasion," IEHAS Discussion Papers 1104, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  17. Martin Feldstein, 1995. "Tax Avoidance and the Deadweight Loss of the Income Tax," NBER Working Papers 5055, National Bureau of Economic Research, Inc.
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Cited by:
  1. Andras Simonovits, 2013. "A family of simple paternalistic transfer models," IEHAS Discussion Papers 1324, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  2. Zoltan Imre Nagy & Viktor Valo, 2013. "The Lawful Execution Of Employer Rights Is An Important Subsystem Of Corporate Governance (A Labour Case Study)," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 3, pages 201-217, September.

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